Qantas to remain Australian as Coalition and Labor agree to limit increase in foreign ownership

Qantas will remain majority Australian owned after the Abbott government was forced by a hostile Senate to back down on its ambitious plan to open up the airline to foreign investment.

In an admission its plan to repeal section three of the Qantas Sale Act would not win support from Labor, the Greens or the crossbench, federal cabinet approved a compromise proposed by the ALP on Monday night.

The compromise deal was ticked off by the Coalition party room on Tuesday and comes despite Transport Minister Warren Truss declaring back in March the government had “no plan B” to help the airline if its repeal of the Sale Act failed.

In June, Labor announced it would allow the current foreign ownership restrictions on Qantas contained in section three of the act, which limit an individual investor to 25 per cent ownership and a foreign-owned airline to 35 per cent, to both rise to 49 per cent.

Qantas: foreign ownership limits are set to increase, but be restricted at 49 per cent. Photo: Getty Images

That move is designed to trigger an inflow of investment but falls short of what the airline wanted.

A vote could now go ahead in the Senate as soon as Wednesday, with the bill then to be sent to the lower house for approval.

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Other changes that could have flowed from repeal of the act, including requirements that two-thirds of the board are Australian citizens, the company be headquartered in Australia and that maintenance, catering and other operations are conducted primarily in Australia will not proceed.

The Abbott government's original proposal had sparked fears among Labor, the Greens and the union movement that the airline could send thousands of Australian jobs overseas.

“This reform will ensure that Qantas will remain majority Australian owned and that Qantas will still call Australia home, while making minor changes in accordance with the aviation white paper I released in December 2009," he said.

A spokesman for Qantas said it was a positive that there was political agreement that Qantas is disadvantaged by the Sale Act and that change is needed.

“While removing all restrictions that apply only to Qantas remains our preference for levelling the playing field, changing the 25 and 35 per cent limits would represent an improvement on the status quo," the spokesman said.

Qantas has been pushing for the Sale Act to be repealed, arguing it does not face a level playing field with its major competitor Virgin, which is majority foreign-owned and does much of its heavy maintenance overseas.

In February, Qantas announced a $252 million half-year underlying loss and plans to cut 5000 jobs and close routes.

Soon after in March, the Abbott government announced it would not give the beleaguered airline a debt guarantee but would instead push to repeal section three, but Labor and Greens opposed that move.

Transport Minister Warren Truss said the government still backed its plan to repeal section three of the Qantas Sale Act.

However, he said it was clear that this would not be able to pass the Senate and so it had decided to accept Labor's proposals.

"It is clear that the Qantas Sale Amendment Bill, which has passed the House of Representatives – and which deletes Part 3 of the Qantas Sale Act, will not pass the Senate. The government will, therefore, accept amendments which remove only the 25% restriction on individual foreign share ownership and the maximum 35% total ownership by foreign airlines," he said.

"The amended bill will go some way to easing restrictive ownership provisions, Qantas will still operate under restrictions that do not apply to any other Australian airline, but will have greater capacity to attract new investment.

"It is important Qantas be granted greater flexibility and this is the only outcome the Senate will pass at this time."